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Tuesday, July 10, 2012

Facebook Update and Notes on Apple

Upon its initial IPO on May 18, we provided a technical assessment as to the bearish nature in which the market frowned on Facebook. After opening at $42 and trading as high as $45, we provided a short-term downside price target of $31.00 per share.

On May 22, we reported that indeed Facebook had said hello to $31.00 per share. On June 6, Facebook set a tradable low at $25.52 and has been rallying ever since. With two months of data now behind it, we thought it reasonable to present a brief update.

Rising impulsively in 12-sessions from its $25.52 low on June 6 to a print high of $33.45 on June 22, a 31% gain, Facebook is showing some signs of life.As evidenced by its initial fall from grace as the broad markets were in the midst of a correction, timing indeed is everything.

Assuming that Facebook is likely to rise and fall in general tandem with the broader markets, we have tentatively given a minor degree -1/a- label to the $25.52 pivot low. Similarly, we have tagged the $33.45 high as an –a- wave at minute degree, which suggests a down/up sequence may lie ahead over the near term.

If this observation proves correct, we suspect that Facebook has more downside ahead in order to consolidate its recent 31% gains. The stock closed today’s session spot on the dashed rising speedline of support traversing upward across the whole of the chart. A decisive breach of this trendline will likely take Facebook down into our downside target window, which opens at $29.84 on the high end, and closes at $28.00 at the low end.

Actionable considerations going forward:

If upon a further pullback Facebook sustains trade and closes beneath 28.55, odds will rise for a retest or breach of the 25.52 pivot low.

In contrast, upon continuation or resumption of the short-term uptrend, sustained trade and closes above 37.56 will raise odds for a retest or besting of the 45.00-dollar opening day high.

July 25 and August 23 mark two dates (+/- one day) upon which Facebook is likely to render pivotal highs or lows. As price action draws nearer to each of these prospective turn-dates, one will garnish greater clarity as to whether each date is likely to mark a high or a low.

Notes on Apple:

Before we share our current notes on trade in Apple, we first wish to share a bullish trade trigger that elected from a breakout above 573, which went on to return over 8% in less than two months.

In the above chart rendered within the May 23 Chart-Cast Pilot, shortly following the 528.66 pivot low, we have highlighted in yellow, the pending 46-pt. buy trigger arrowed in advance of its election. As an aside, the chart from May also boasts a 16-pt. downside price captured at 540, and profits of 3.44% booked upon reversing long at 566.78 via a non-discretionary short-term trading strategy, which had been short from 587 on April 30.

That was then – This is now:

BAM!- Today, upon Apple briefly trading north of 619 before dropping more than $8 dollars a share, we highlight the capture of the 46-pt. trigger we had cited back in May. As an aside, our non-discretionary trading strategy maintains a profitable long position taken from 580.39 on June 29.

Actionable considerations going forward:

Against the prevailing pivot high of 619.87, a breach beneath the rising red trendline trajectory cites prospects for a $14 dollar decline in share value.

In contrast, so long as the pivot low at 601.58 holds, a breakout above the rising green trendline cites prospects for a $14 dollar advance in share value.

In the spirit and wisdom of Adam Smith, it will generally be more advantageous for traders and investors to acquire from the professional analyst the charts he has occasion for than attempting to render such work for himself.